With MiniLuxe Holding Corp. (CVE:MNLX) It Looks Like You'll Get What You Pay For

There wouldn't be many who think MiniLuxe Holding Corp.'s (CVE:MNLX) price-to-sales (or "P/S") ratio of 1.3x is worth a mention when the median P/S for the Consumer Services industry in Canada is similar at about 1.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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View our latest analysis for MiniLuxe Holding

How MiniLuxe Holding Has Been Performing

MiniLuxe Holding has been doing a decent job lately as it's been growing revenue at a reasonable pace. It might be that many expect the respectable revenue performance to only match most other companies over the coming period, which has kept the P/S from rising. If not, then at least existing shareholders probably aren't too pessimistic about the future direction of the share price.

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What Are Revenue Growth Metrics Telling Us About The P/S?

In order to justify its P/S ratio, MiniLuxe Holding would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered a decent 6.6% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 34% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Comparing that to the industry, which is predicted to deliver 8.7% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised revenue results.

In light of this, it's understandable that MiniLuxe Holding's P/S sits in line with the majority of other companies. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.

What Does MiniLuxe Holding's P/S Mean For Investors?

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

It appears to us that MiniLuxe Holding maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. With previous revenue trends that keep up with the current industry outlook, it's hard to justify the company's P/S ratio deviating much from it's current point. Unless the recent medium-term conditions change, they will continue to support the share price at these levels.

Before you settle on your opinion, we've discovered 3 warning signs for MiniLuxe Holding (1 doesn't sit too well with us!) that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.